Reference no: EM13584205

1. Which of the following should be reported as a change in accounting estimate?

a. change in the reported beginning inventory amount due to a discovery of a bookkeeping error

b. change from the completed-contracted method to the percentage of completetion method for revenue recognition on long-term construction contracts

c. increase in the rate applied to net credit sales from 1 percent to 1-1/2 percent in determining losses from uncollectible receivables

d. change made to comply with a new FASB pronouncement

2. At the time Fisher Corporation became a subsidiary of Ashbury Corporation, Fisher switched depreciation of its plant assets from the straight line method to the sum of the years digits method used by Ashbury. With respect to Fisher, this change was a

a. change in an ccounting estimate

b. correction of an error

c. change in accounting principle

d. change in the reporting entity

3. Lexicon Inc. bought a patent for $600,000 on january 2, 2004, at which time the patent had an estimated useful life of ten years. on Feb 2 2008 it was determined that the patents useful life would expire at the end of 2010. How much would Lexicon record as amortization expense for this patent for the year ending Dec 31 2008?

a. 140000

b. 120000

c. 105000

d. 60000

4. On Dec 31 2008 Buckeye Corporation appropriately changed its eventory caluation method to FIFO cost from LIFO cost for both financial statement and income tax purposes. The change will result in a $140000 increase in the beginning inventory at Jan 1 2008. Assume a 30 percent income tax rate. The cumulative effect of this accounting change Buckeye for the year eneded Dec 31 2008 is

a. $0

b. $42,000

c. $98,000

d. $140,000

5. Kentucky Enterprises purchased a machine on Jan 2 2007 at a cost of $120,000. An additional $50,000 was spent for installation, but this amount was charged erroneously to repairs expense. The machine has a useful life of five years and a salvage value of $20,000. As a result of the error,

a. retained earnings at Dec 31 2008 was understated by 30000 and 2008 income was overstated by 6000

b. reatined earnings at Dec 31 2008 was understated by 38000 and 2008 income was overstated by 6000

c. retained earnings at Dec 31 2008 was understated by 30000 and 2008 income was overstated by 10000

d. 2007 income was understated by 50000

6. selected information from the accounting records of the Vassar Company is as follows:

Net accts receivable at Dec 31 2007 - 900,000

Net accts receivable at dec 31 2008 - 1,000,000

accts receivable turnover - 5 to 1

inventories at dec 31 2007 - 1,100,000

inventories at dec 31 2008 - 1,200,000

inventory turnover - 4 to 1

What was Vassar's gross margin for 2008?

a. 150000

b. 200000

c. 400000

d. 500000

7. On january 1 2005 Fulbrite Services Inc. purchased a new machine for $600,000. The machine had an estimated useful life of eight years and a salvage value of $150,000. Fulbrite elected to depreciate the machine using the double declining balance method. On Jan 1 2008 the company decided to change to straight line

Ignore income tax considerations, prepare the entries to record

1) Fulbrites 2007 depreciation expense

2) Fulbrites 2008 depreciation expense

8. Comparative data for Kerry Inc. for the two-year period 2007-2008 are given as follows:

Income statement data

Net sales - (2008) 1,400,000 - (2007) 800,000

COGS - (2008) 840,000 - (2007) 440,000

Gross profit on sales - (2008) 560,000 - (2007) 360,000

Selling, General, and other expenses - (2008) 400,000 - (2007) 130,000

Income tax expense - (2008) 40,000 - (2007) 30,000

Net income - (2008) 120,000 - (2007) 200,000

Dividends paid - (2008) 80,000 - (2007) 80,000

Net Increase in retained earnings - (2008) 40,000 - (2007) 120,000

Balance Sheet Data

Assets:

Current assets - (2008) 540,000 - (2007) 440,000

Land, buildings, and equipment - (2008) 800,000 - (2007) 720,000

Total Assets - (2008) 1,340,000 - (2007) 1,160,000

Liabilities and stockholders equity:

Current liabilities - (2008) 300,000 - (2007) 240,000

Bonds Payable(8%) - (2008) 320,000 - (2007) 320,000

Common stock ($5par) - (2008) 480,000 - (2007) 400,000

Retained earnings - (2008) 240,000 - (2007) 200,000

Total liabilities and stockholders equity - (2008) 1,340,000 - (2007) 1,160,000

From the given data, compute the following for 2008 and 2007:

1) current ratio

2) net profit margin on sales

3) gross profit margin on sales

4) debt to equity ratio

5) times interest earned